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434

RESIGNATION OF MR. CHASE.

much like a shaky railroad company, willing to mortgage its present property and future prospects, to get over present difficulties; or that of a heavy operator, who is willing to make any sacrifices, if he can only be tided over a dan

gerous crisis.

Still, in the new and unexpected condition of things, in which the Secretary of the Treasury found himself—the sudden and frightful call on the Government for money, and in our want of credit in the foreign market, it was hard to see what other course could be pursued. Fabulous sums were needed to carry on the gigantic war into which we had been forced, and there seemed no way to raise them except by the system of expedients which was adopted. The resignation of the Secretary of the Treasury, therefore, in the very crisis of our affairs, created a profound sensation, and various causes were assigned for it-some asserting that despair of meeting the enormous demands of the Government, was the motive-others, that personal disagreement with the President, in the matter of appointments; others, still, that he was a candidate for the Presidency, and could not support his successful rival; and still, others, that it was in consequence of the repeal of the “Gold Bill," as it was called.

Although the present work was designed to be only a history of the more important military events of the war, yet a brief account of the financial measures, by which it was carried on, seems necessary to its completeness.

As the financial policy was not changed, on the resignation of Mr. Chase, and Mr. Fessenden, who succeeded him, simply completed what was already begun, à history of our finances, under the former, is the history of them during

the war.

Some faint idea of the difficulties that beset Mr. Chase's path, at the outset, may be gathered from the fact, that in

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the December previous to his inauguration into office, How ell Cobb, Mr. Buchanan's Secretary of the Treasury, put into the market five million dollars of treasury notes, payable in one year, and received bids for only a half a million, at twelve per cent.

If such was the credit of the Government, and such the difficulty in raising a small sum of money when war was threatened, one can imagine the prospect before the new Secretary, when war, the end of which no one could see,

had actually commenced, and when, according to his own estimate, not five millions of dollars, but three hundred and nineteen millions, would be needed the first year to meet the wants of the Government.

Congress, which adjourned the first week in August, 1861, passed an act authorizing him to borrow two hundred and fifty million dollars by the issue of bonds not to be redeemed for twenty years, and bearing a no greater interest than seven per cent. ; also to issue fifty million dollars in seven and three-tenths per cent treasury notes, payable in three years, and of United States notes without interest, and payable on demand. A direct tax of twenty million dollars was also ordered to be levied-while the customs were increased Of this, one hundred and eighty million dollars were appropriated to the Army, thirty millions to the Navy, and three millions to purchase and hire vessels.

It was an easy matter to authorize the Secretary to bor. row money by the issue of interest-bearing bonds, and treasury demand notes, but it was another thing to find lenders. If it had been a foreign war in which we were engaged, we could have borrowed an unlimited amount of money abroad; but, in a war, which, in the eyes of other nations would end in the total disruption of the Government, not a dollar could be obtained. It must be raised at home or not at all, and obviously, to obtain the enormous

136

FIRST LOAN TAKEN.

sums that would be needed, the only course to be pursued was the one adopted by the Emperor of France,-viz.: make it a people's loan, by distributing it in small sums over the entire country. This could be done only through agencies established at every important point, to receive subscriptions. But it would take some time to get the machinery in complete working order and prepare the Seven and threetenths treasury notes. In the meantime money was needed, and the Secretary therefore resorted to a temporary loan of five million dollars for sixty days, giving the Twenty-years' bonds as collateral security. This was taken up in a few hours in New York. He then visited the three great commercial cities on our Northern sea-board- Philadelphia, New York kuù Boston-and after a frank interview with the heavy capitalists, succeeded in getting the Banks to take fifty million dollars of the Seven-thirties at par; of which New York alone took more than two-thirds. It was left optional with the Banks to take two more issues to the same amount.

The various agencies established were very successful, so that thirty-eight millions of the fifty millions of dollars were

The Banks then took the second issue of fifty million dollars, bearing date October 1st, 1861. In the meantime the demand notes, as they were called, were put in circulation, and a vast amount of State loans thrown upon the market, which so diverted the investinent by the people in the treasury notes that the Banks refused to take the third issue of fifty million dollars, preferring the Twentyyears' six per cent. stock at a discount, that made it equivalent to a seven per cent. stock at par.

On the 1st of January, 1862, only a little over fifty million dollars of the treasury notes had been subscribed for, outside of the Banks, while twenty-four million dollars of demand notes had been issued, and fifty millions of Twentyyears' stock—though this sum had not been realized. Twe

taken up

SUSPENSION OF THE BANKS.

437

years' six per cent. notes to the amount of fourteen million, nineteen thousand, three hundred and forty dollars and sixtysix cents had also been issued, and nearly thirteen million dollars had been borrowed on sixty days six per cent. notesmaking in all one hundred and ninety-seven million, two hundred and forty-two thousand, five hundred and eightyeight dollars and fourteen cents.

The tax of twenty million dollars gave us no revenue. It was apportioned to the several States, but of course was collectible only in the loyal ones; and in most cases as the amount they had already furnished in equipping the national troops equaled the amount of the tax, they were given credit for it, so that the only effect of the tax was to pay a debt which might have been deferred. In the firm belief that the war would be a short one, the Government had expended its wealth with an extravagance never before witnessed in any nation, and which, if persisted in for any length of time, whatever other national resources we might possess, threatened to end the war by national bankruptcy.

In the beginning of the year 1862, fifty million dollars of

paper money had been set afloat, redeemable in coin. and receivable for customs. Government stocks were at a discount, and in the general panic and upheaving, the Banks, utterly indifferent to the laws under which they had been organized, suspended specie payment, and yet went on doing business as before. The increase of the army, and the lavish expenditures had raised the expenses of the Government to about two million dollars per day; and yet the first step had not yet been struck toward putting down the rebellion. The Army of the Potomac lay in front of Washing

ton—the Mississippi was closed nearly up to the Ohio, and the • lines of the enemy, with scarcely a break, extended along the

southern border of the Northern States from Missouri to the Atlantic.

438

INTERNAL TAXATION

The financial prospect under these circumstances was appalling, and the question, "Where is all the money needed,

, to come from?” was one which might well stagger any Secretary of the Treasury. Congress might authorize loans, but who would take them, unless they could see some certain method adopted by which the interest would be paid. Direct taxation to the amount needed was not to be thought of, for the Constitution required that a direct tax should be laid according to population, which, as between the Eastern and Western States would be grossly unjust. It was very plain to men familiar with the financial history of Governments, that we must fall back on some system of internal taxation. But the excise laws of England were odious to our people, and regarded as fit only for an oppressive Government, and hence the party in power feared to enact them, lest it should be overthrown in the next election. Besides, the perfection of a system of internal revenue required time, while the Government was in pressing need of money, for it was heavily in arrears, both to the army and to contractors.

Still hugging the miserable delusion that the war would be over in a few months, Congress cast about for some way to raise enough for immediate wants, thinking that if these were once met, the danger would be over, and then the Government could gather up the raveled ends of its financial salernes, and once more bring order out of chaos.

The only method of immediate relief, therefore, seemed to be the issue of paper money--the last desperate resort of Governments on the verge of bankruptcy. So in the last of February the Secretary was authorized to issue one hundred and fifty millions of dollars in notes, in such denominations as he chose, down to five dollars. But knowing that paper money depreciated just in proportion to the amount issued, Congress saw that the public loan would not be taken if the interest was payable in paper, for a seven per cent. stock

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